Good afternoon, everyone. Thank you for joining our Q4 2025 earnings conference.

Today we will first have Dr. Peng Bai, our Chairman and President, provide an overview of our fourth quarter and full-year performance.

I'll then take you through our financial results in detail and offer guidance for the upcoming quarter. We'll then open the floor for a Q&A session.

With that, I turn the call over to Dr. Bai.

Thank you, Daniel. Good afternoon, everyone.

Thank you for joining our earnings call. Fourth quarter 2025 sales revenue for Hua Hong Semiconductor reached an all-time high of $659.9 million with a gross margin of 13% for the quarter, both in line with our guidance.

For the full year of 2025, the company reported sales revenue of $2.4 billion and a gross margin of 11.8%, both achieving year-on-year growth and meeting management expectations. Against the backdrop of the global semiconductor market being driven by demand for AI and related products, coupled with a recovery in consumer demand led by the domestic market, the company maintained full-capacity operations throughout the year at an average capacity utilization rate of 106%, which ranked among the leading levels in the foundry industry.

By optimizing product mix, reducing costs, and improving operational efficiency, we achieved strong performance across various specialty technology platforms, especially in standalone NVM and the power management areas, effectively supporting the company's revenue growth and margin expansion. In 2025, the company continued to advance its strategic plan for capacity expansion.

The first phase of capacity construction for the second 12-inch production line in Wuxi, we call Fab 9, exceeded expectations for completion, and the Shanghai 12-inch manufacturing base Fab 5 acquisition progressed as planned. Looking ahead, the company will maintain strong focus on developing world-class specialty technology platforms with innovation and through rapid generational iteration, while deepening collaborations with strategic customers both domestically and internationally.

We remain confident in our ability to seize growth opportunities amid changes in the global semiconductor industry and are striving to meet shareholders' long-term expectations. Now, I would like to hand the call over to our CFO, Mr.

Daniel Wang, for his comments.

Thank you, Dr. Bai, for your inspiring comments.

Now, let me walk you through a summary of our financial performance for the fourth quarter, followed by a recap of our full-year 2025 results. I'll then provide our revenue and margin outlook for Q1 2026 before opening the floor for the Q&A session.

Now first, let us review our financial results for the fourth quarter. Revenue reached another all-time high of $659.9 million, 22.4% over Q4 2024 and Q4 2025, and 3.9% over Q3 2025, primarily driven by increased wafer shipments and improved average selling price.

Gross margin was 13%, 1.6 percentage points over Q4 2024, primarily driven by improved average selling price and cost reduction efforts, and a 0.5 percentage point dip from Q3 2025, primarily due to increased labor costs. Operating expenses were $130.2 million, 17.7% over Q4 2024, primarily due to increased labor costs and depreciation expenses, and 29.6% over Q3 2025, mainly due to increased labor costs.

Other income net was $34.1 million, compared to other net loss net of US$40.5 million in Q4 2024, primarily due to foreign exchange gains versus foreign exchange losses in Q4 2024, decreased finance costs, and increased government subsidies. It was 92.1% over Q3 2025, mainly due to decreased finance costs.

Income tax expense was $8.1 million, 22.3% higher than Q4 2024, primarily due to increased taxable income. Net loss for the period was $18.7 million, narrowed by 80.6% compared to Q4 2024, and a widening of 159.9% in loss from Q3 2025.

Net profit attributable to shareholders of the parent company was $17.5 million, compared to a loss of $25.2 million in Q4 2024 and a profit of $25.7 million in Q3 2025. Basic earnings per share was 1 cent.

Annualized ROE was 1.2%. Now let's take a closer look at our Q4 2025 revenue performance.

From geographical perspective, revenue from China was $539.3 million, contributing 81.8% of total revenue and an increase of 19.6% compared to Q4 2024, mainly driven by increased demand for power management IC, MCU, flash, and CIS products. Revenue from North America was $72.8 million, an increase of 51.3% compared to Q2 2024, mainly driven by increased demand for power management IC and MCU products.

Revenue from other Asia was $28.4 million, an increase of 9.1% compared to Q4 2024. Revenue from Europe was $19.3 million, an increase of 35.6% compared to Q4 2024, mainly driven by increased demand for MCU and IGBT products.

With respect to technology platforms, revenue from embedded non-volatile memory was $180.2 million, an increase of 31.3% compared to Q4 2024, mainly driven by increased demand for MCU and smart card ICs. Revenue from standalone non-volatile memory was $56.6 million, an increase of 22.9% compared to Q4 2024, mainly driven by increased demand for flash products.

Revenue from power discrete was $168.9 million, an increase of 2.4% compared to Q4 2024, mainly driven by increased demand for general MOSFET products. Revenue from logic and RF was $80.4 million, an increase of 19.2% over Q4 2024, mainly driven by increased demand for CIS products.

Revenue from analog and power management IC was $173.8 million, an increase of 40.7% over Q4 2024, mainly driven by increased demand for other power management IC products. Now, turning to our cash flow statement.

Net cash flows generated from operating activities was $246 million, 29.5% lower than Q4 2024, mainly due to increased payment for suppliers and decreased receipts of government subsidies, partially offset by increased receipts from customers. It was 33.6% over Q3 2025, largely driven by increased receipts of government subsidies.

Capital expenditures were $633.5 million in Q4 2025, including $559 million for Hua Hong 12-inch and $74.5 million for Hua Hong 8-inch. Other cash flow generated from investing activities was $61.7 million in Q4 2024, including $36.6 million receipts of government grants of equipment, $13.6 million interest income, and $1.2 million receipts of disposal of equipment, partially offset by $3.6 million investment in equity instrument.

Net cash flows generated from financing activities was $1,361.1 million, including $919 million proceeds from bank borrowings, $594.6 million from other financing activities, $12.1 million receipts of government grants for finance costs, and $4.7 million proceeds from share option exercises, partially offset by $136.1 million of bank principal repayments, $32.8 million interest payments, and $0.4 million lease payments. Now let's move to the balance sheet.

Cash and cash equivalents was $4,961 million on December 31st, 2025, compared to $3,904.7 million on September 30th, 2025. Other current assets increased from $739.7 million on September 30th, 2025 to $787 million on December 31st, 2025, mainly due to increased value-added tax credit.

Property, plant, and equipment was $6,676.4 million on December 31st, 2025, compared to $6,162 million on December 30th, 2025, primarily due to capacity expansion in Hua Hong manufacturing. Equipment instruments designated at fair value through other comprehensive income increased from $381.3 million on September 30th, 2025 to $478.8 million on December 30th, 2025, primarily due to fair value gains recognized in equity instruments.

Interest-bearing bank borrowings increased from $2,397.5 million on September 30th, 2025 to $3,190.8 million on December 30th, 2025, primarily due to increased drawdowns on bank borrowings. Total assets increased from $12,511.7 million on September 30th, 2025 to $14,453.8 million on December 31st, 2025.

Total liabilities increased to $5,289.5 million on December 31st, 2025 from $3,502.6 million on September 30th, 2025. Debt ratio increased to 36.6% on December 31st, 2025 from 28% on September 30th, 2025.

Here's a recap of 2025. Revenue was $2,402.1 million, a growth of 19.9% over the prior year, primarily driven by increased wafer shipments.

Gross margin was 11.8%, 1.6 percentage points over 2024, primarily driven by improved average selling price and cost reduction effort, partially offset by higher depreciation costs. Operating expenses were $425.6 million, 7.9% over 2024, largely attributable to increased research and development expenses.

Other income net was $54.2 million, 146.4% above 2024, primarily due to decreased finance costs and foreign exchange losses and increased government subsidies, partially offset by decreased interest income. Loss for the year was $110.8 million, narrowed by 21.1% compared to 2024.

Net profit attributable to shareholders of the parent company was $54.0 million, 5.6% dip from 2024. Basic earnings per share was 3.2 cents.

ROE was 0.9%. Finally, let's discuss our outlook for the first quarter of 2026.

We expect revenue to be in the range of $650 million to $660 million, with a projected gross margin of 13% to 15%. This concludes my financial remarks.

We'll now begin the Q&A session. Operator, please assist.

Thank you.

Dr. Bai, congratulations for the robust result and the successful acquisition of Huali.

Beyond the contribution to Hua Hong's revenue and profit, could you elaborate the strategic resource Hua Hong got through this acquisition, and what's your plan to leverage these resources to accelerate Hua Hong's future growth? Thank you.

Thank you. First, basically what we acquired, Fab 5, what do we call Fab 5 within the Hua Hong system, is a 12-inch fab.

It has 55nm, 40nm-based specialty technology. Quite a bit of the technology platform have overlap with what we already have in HHGrace in Wuxi.

I think we look at the acquisition from the following points that we think that's going to be favorable to our long-term growth. One is that we certainly grow the scale of our company through this acquisition.

We added about 40k capacity that's already in production with existing customers. With the scale is one factor.

Another one is with Fab 5 joining HHGrace, we can do a better job optimizing the distribution of our different specialty technologies across all the manufacturing capacity. This will show up in a higher efficiency for our TD activity, should also show up in a higher efficiency and lower cost for our entire manufacturing base.

Basically, we view this definitely as a strategic acquisition, will accelerate our growth both in terms of revenue, and as well as our ability to be more profitable. Thank you.

Okay. My second question is about the supply-demand relation of the 8-inch and the 12-inch mature fab business this year.

We noticed some foundry, including the largest one, just recently announced to exit some 8-inch business or sell their some 12-inch fab to the memory makers. What's your view on this supply-demand balance of the 8-inch and 12-inch business globally this year, and what's the impact on your ASP?

I also noticed that there are some reports that you have some price adjustment in the end of last December. What's your view on this ASP trend of Hua Hong this year?

Thank you.

Okay. We also noticed some of the reports talking about some of our foundry competitors might be selling some of the capacity to other people.

If they just change the ownership from one company to another without actually reducing the capacity, then doesn't really change the supply-demand situation too much. With respect to some of the logic capacity moving to memory because memory certainly is in high demand nowadays, that certainly would reduce the supply in the logic side, and overall is a positive thing for us because we are mostly in the logic foundry business, although we do have some flash memory business as well, but overall that would be a positive sign.

I think overall because of the AI-driven growth in the overall semiconductor market, and we view that as overall positive. It might show up differently in different market segment.

It may show up differently in different technology platforms we have our capacity in or our product in. Overall, we view that as a positive development for us.

In that context, if the supply gets tighter, it does give us more opportunity to increase prices. We have been doing that over the course of last year.

Surgically, it's not across the board increase by any means, but surgically for some certain area where we think we can really meet the supply, we take the opportunity to move up the prices a little bit. Some of them already show up in 2025 results, and we expect that in 2026, we might still have some room to go, especially on the 12-inch side.

8-inch, the supply-demand is more in balance compared to 12-inch, even if we would like to increase prices as well in 8-inch, but our room probably is going to be limited. Overall, we are cautiously optimistic that we may be able to do something in that area as well.

Thank you. Thank you very much.

Thank you. Very clear.

Thank you for taking my questions. Firstly, I would like to wish you all a Happy Chinese New Year, 给大家拜个早年.

I have two questions. The first one is as we can see this quarter, the capacity utilization rate declined slightly, and what are the reasons for that?

Are there any uneven or unbalance on the different platforms? Can our capacity be reallocated between different platforms quickly?

That's my first question. Thank you.

Oh, the change is fairly small, probably almost in the calculation error. I think the main reason is Fab 9 were rapidly bringing the capacity online.

There's always a little bit of lag between how fast you get the equipment installed and get the capacity online versus when you have the loadings and the order for that capacity. That's a typical case in a ramping fab that if, especially when you ramp very fast, that there is a bit of a lag between the capacity, and because the loading is based on what's the capacity brought online, so that's the reason.

There's a couple percent decrease.

Got it. Thank you.

That's very clear. My second question is about our future performance drivers on the demand side.

How much of driver will the AI-related product be for the company's future revenue growth? Also, as we see the localization trend, do you see which kind of product categories will be the most significant boost by the localization?

Could you provide a ranking or priority list for these products? Thank you.

Okay. This is a complex question.

Let me try to kind of see whether I can answer very clearly. I think if you look at from end-market standpoint of view, clearly AI-related products are increasing fast.

What does it mean for us is AI-related products actually cut across quite a few of our technology platforms. For example, the AI-related products in power management area is increasing.

MCU, not so much, but it's also a little bit of impact. Discrete power devices also have some impact.

The power management is a one area we clearly see strong strong growth related to AI. In that regard, if you stay at this end-market dimension, it's not AI is one growth area.

Other areas like autonomous driving, automotive, the car related, all the new robots is also growing, and all the green energy-related end-market, it also shows growth. All those end-market, the growth area, do cut across in somewhat a complex manner, cut across different technology platforms.

If I look at our technology platforms in that dimension, if you just look at our 2025 results, you already see that the two biggest growth area is power management and MCUs. Those two areas, plus in addition to the discrete power devices, constitute the three largest technology platforms that we have from the revenue standpoint of view.

Going forward, I expect the power management area, the BCD platform we have, will continue strong growth. MCU, Hua Hong, HHGrace has a great advantage, very competitive in this area.

It's also going to be an area that is going to grow fast. There, I will just take this opportunity to do some marketing, is that we also have new technology platforms in 50 55nm and 45nm all coming on strong.

That should be also strong growth there. In the end, I think if you look at our distribution, our revenue distribution, I will still continue to see MCU probably one of the biggest, power management second, discrete power devices probably will be more stable.

Growth is not as fast, but it will remain the number three. The other two, in terms of logic and RF, we like that to grow even faster, and standalone memory, we also think will grow reasonably fast.

Some of the memory shortages mostly in DRAM probably going to have some spillover into the NAND memory area, but I think it's going to spill a little bit over to the NOR flash area so that we should also benefit. That's how I view the market going forward.

Okay. Can I add a little question on that?

Dr. Bai, how do you view the sustainability of this current memory cycle?

What's the impact on Hua Hong, and what kind of measures will be taken?

That's a good question. If you look at historical pattern, memory tends to go through boom and bust cycle.

Although this time around, a lot of people think because AI is a different beast, that maybe this cyclical nature of the memory market will be a little bit different. I don't have crystal ball, and I do believe that eventually it will be going to a cycle.

Maybe this time the boom cycle will last longer. It probably heavily depends on how long this cycle going to last.

I think in the near future, certainly for 2026, there's no sign that's going to slow down. Maybe in a year, two or three that, if you go by historical pattern, it should start to calm down somewhat.

I should add that right now, because of the AI-related area driven up DRAM prices so much, it does have a little bit of a depressing effect on the consumer market because a lot of the consumer products probably can't afford this higher DRAM prices. Therefore, they might push out their product refreshment cycle a little bit.

That will come across as a negative for some of our products as well. Overall, I think the growth area still outweight the area that's going to be negatively impacted by this super memory cycle that we seem to be in the middle of.

Okay. That's all my questions.

Thank you, Dr. Bai.

Thank you.

Thank you for taking my question. 白博、丁总好，我是国信证券的分析师叶子.

I have two questions. The first question is about the price.

Considering the rising costs of the raw materials, we also can see some products such as power devices raise the price. The demand just now Dr.

Bai mentioned is structural. How do you see the sustainability of the price hikes?

This is the first question.

In terms of raw material, by the time it gets to us in the fab, we call that direct material or indirect material. We do see a few areas where there's raw material prices start to show up in the semiconductor materials that we use.

I'm trying to think copper is probably one area that will add a little bit of a cost to the copper cable if you happen to be building a fab, which we are. We do see that.

We also see some other raw material increases affecting a little bit of the material we buy. I would say, by and large, I do not see this as a significant factor for our cost structure.

There's going to be some places that there's going to be increases, and there's also going to be some decreases, and overall, I do not think it's going to be a significant increase. Another factor is that, over time, we use more and more domestically produced materials, and then in general, their costs are better.

Overall, I don't think we are going to be looking at a situation that the material will be in cost increase for us going forward.

Thank you. Very clear.

My another question is about the utilization things. We are in good position, but some 12-inch foundries are not yet at full utilization.

How do you see the cycle? Can you give us a little bit of your perspective?

Where are we today? Is that possible maybe there are some potential order shifts of our customers maybe after we increase the price?

Yeah. The fab utilization affected by a few factors.

One is how competitive is your technology offering. That include whether you have a complete offering of the solutions to the customer for what customer needs.

That's one factor. Another one, of course, is pricing.

If you price too high, you will lose customer on one hand. On the other hand, if you are willing to go down on the prices, it does tends to increase your loadings.

For those two factors, for example, then on technology front, HHGrace is a well-positioned. We are premier foundry in China.

A lot of our technology platform, I would say we are probably number one in domestically and very competitive even internationally, not all of them, but some of them certainly. Especially in this specialty technology area, which Hua Hong has HHGrace has been working on for the last three decades almost.

That's one factor. Another factor is that some of our international customers, especially the European ones, and now we start to see American company as well, that have this China for China strategy, that they try to move some of their product that originally were manufactured overseas to be manufactured inside China.

That's another factor that will help our loading. When those company looking for a partner in China, they clearly want to have somebody who is in term of technology-wise is in a good position, as well as they want a most stable company, the bigger company.

We are usually being viewed as the first choice. In many cases were the first choice as their Chinese partner.

We do benefit from that factor as well. I think this trend will probably going to continue giving this geopolitical situation and the world semiconductor market is evolving.

Thank you.

Thank you. That's all my questions, and looking forward to a better performance in the coming year, and happy Chinese New Year.

Thank you.

Thank you.

Dr. Bai, I have a follow-up questions.

What's the current status of Fab 9? Is it fully completed?

I I noticed the capex this year last year is $1.8 billion, and which down slightly versus 2024. How we should model the capex for 2026, and when you plan to initiate the next phase of the expansion?

What's your plan on this the what what should I say, the phase two of the Fab 9 or the new new fab? Thank you.

Leping, let me address that question. Basically, the total capital expenditures for this project, Fab 9A, is at $6.7 billion, okay?

By end of last year, by end of last year, we spent about slightly over $5 billion. We spent another $1.3 billion basically these are the POs, I mean we have basically issued, not completely spent from cash flow perspective, okay?

I would say basically there's another about, to get to $6.7 billion, there's probably another $1.2 to $1.3 billion on cash flow, from cash flow perspective, okay? Most of the POs have been issued for that project.

I would expect, that the cash will be spent mostly, this year and some probably, remaining in 2020 2027.

Mostly this year, because this year we're going to reach the peak capacity for Fab 9A, the first half of Fab 9. Your second part of the question is on Fab 9B, which is our next project to fill up the empty half of Fab 9.

That project, we got all the approval, all the necessary paperwork. We plan to start the actual engineering construction work after the Chinese New Year, basically in March.

We should be able to start getting the equipment in by end of this year, probably October time frame. The spending obviously are going to be mostly in 2027.

In 2027, we start another capacity ramp on the Fab 9B, and we hope we can complete that ramp even faster in a velocity that's even faster than Fab 9A. Fab 9A, we ramped very fast.

In two years, we pretty much get to the peak. The output will take a little bit longer because, as I said, there's always a little bit of lag between the capacity being in place versus when you get the wafers out and turn that into revenue.

In terms of capacity in place, using that as a milestone, Fab 9B will start in 2027, and we should get that done in less than two years as well.

This year, 2026, the capex will be slightly down, and the 2027 will be up significantly. Is my understanding correct?

Correct. That's correct.

Okay. Thank you.

Thank you very clear. Thank you.

I don't have any further questions.

I want to have a follow-up question on that. In terms of our equipment localization rate, will Fab 9B have a higher rate than Fab 9A?

You're talking about the fab utilization rate? They're already a little bit above 100, it's not going to be significantly higher.

Sorry, I mean on the equipment localization ratio. Equipment tools, yeah.

Oh, okay.

Yeah. The answer is yes.

The general direction, as the domestic equipment industry become more and more capable every year, every new project we have, we tend to have a higher procurement of domestic equipment. We obviously still going to be making our procurement decision based on what is the best, both technically as well as commercially for the company, that's the decision criteria.

The reality is that the domestic produced equipment are becoming more and more capable, and commercially a lot of depend on individual equipment, they can be more attractive. Then the end result we expect is that the Fab 9B project, we will end up with a higher domestic equipment content.

Got it. Got it.

Thank you, Dr. Bai.

Once again, thank you all for joining us today and for your wonderful valuable questions. The Year of Horse is right around the corner.

We would like to take this opportunity to thank you all for all the support and trust you have given to us, and wishing you and your family a very joyful holiday season, and a healthy and prosperous new year. Gong Hey Fat Choy.

We look forward to catch up with you very, very soon. Thank you.

Xin Chun Kuai Le. Happy New Year.